Miami’s Gold Rush: Finance Firms and Crypto Move In, Bringing Strains

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From his new office in Mia­mi Beach, real-estate investor 

Bar­ry Sternlicht

is only steps from the ocean. His water­front man­sion is just a short dri­ve away. Cold win­ters and state income tax­es are a thing of the past now that he has relo­cat­ed here from Connecticut.

Mr. Stern­licht, known for launch­ing the trend­set­ting W Hotel brand, moved his Star­wood Cap­i­tal Group to the city in 2018. He’s part of a boom­ing migra­tion of finan­cial firms, tech­nol­o­gy com­pa­nies and ven­ture cap­i­tal­ists that has gained momen­tum in the years since then, as more firms aban­don the North­east, Mid­west and West Coast for the dai­ly plea­sures of South Flori­da life and its friend­lier busi­ness climate.

Led by Mayor 

Fran­cis X. Suarez,

Mia­mi is attempt­ing some­thing so ambi­tious it has rarely suc­ceed­ed any­where before—transforming a city iden­ti­fied with glitzy beach­es and nightlife into a world-class busi­ness and finan­cial center. 

So far it seems to be working. 

Ken Griffin,

who already lives pri­mar­i­ly in Flori­da, said in June that he is mov­ing his giant hedge fund Citadel from its Chica­go head­quar­ters to Mia­mi. Financiers 

Carl Icahn

and Orlan­do Bra­vo are among the bil­lion­aires who relo­cat­ed to the area dur­ing the pan­dem­ic. The cryp­tocur­ren­cy exchange plat­form Blockchain.com moved its head­quar­ters to Mia­mi last year. The Mia­mi Heat now play in the FTX Are­na, named for the cryp­to exchange that paid $135 mil­lion for the rights.

Barry Sternlicht escaped cold winters and state income taxes.



Photo:

Star­wood Cap­i­tal Group

But Mia­mi is expe­ri­enc­ing plen­ty of grow­ing pains along the way. Wealthy tech and finance pro­fes­sion­als are crowd­ing out many life­long res­i­dents. Apart­ment rents are ris­ing faster in the Mia­mi area than any­where else in the coun­try, by 58% over the past two years through March, accord­ing to Realtor.com. In some desir­able neigh­bor­hoods, land­lords are dou­bling the rent after a lease expires because they know trans­plants from the North­east and West Coast are will­ing to pay that much more. 

Starwood’s new head­quar­ters were sup­posed to be com­plet­ed last year, but a sup­ply-chain crunch and per­mit­ting delays mean Mr. Stern­licht is still wait­ing. Mr. Stern­licht would like all his top exec­u­tives to live in Mia­mi Beach, but a num­ber of them have school-age chil­dren and say they won’t move because the area’s pri­vate schools have long wait­ing lists.

State-to-state net income migration from 2019 to 2020

For the top five high­est-gain­ing states:

For the bot­tom five states:

And how much of the high­est-gain­ing states’

migrat­ed income came from N.Y. and Calif.:

For the top five high­est-gain­ing states:

For the bot­tom five states:

And how much of the high­est-gain­ing states’

migrat­ed income came from N.Y. and Calif.:

For the top five high­est-gain­ing states:

For the bot­tom five states:

And how much of the high­est-gain­ing states’

migrat­ed income came from N.Y. and Calif.:

Now he wor­ries that Mia­mi might be overex­tend­ing itself just as storm clouds gath­er over the nation­al econ­o­my. When he looks at Miami’s Wyn­wood neighborhood—long a mix of ware­hous­es and art gal­leries that is now explod­ing with new office and res­i­den­tial buildings—the Star­wood chief exec­u­tive sees a thick­et of cranes. As head of one of the world’s largest prop­er­ty own­ers, he wor­ries it is rem­i­nis­cent of oth­er hot areas that ramped up before expe­ri­enc­ing busts.

“Every­one and their cousins are look­ing to build a build­ing here,” he said. “I’m get­ting nervous.”

Finan­cial com­pa­nies that have opened offices in the city over the past 18 months rep­re­sent around $2 tril­lion in assets under man­age­ment, accord­ing to the City of Mia­mi. Hedge fund Elliott Man­age­ment Corp. moved its head­quar­ters to West Palm Beach, and plen­ty of oth­ers are estab­lish­ing or expand­ing their footholds in the area, includ­ing Point72 Asset Man­age­ment, Schon­feld Strate­gic Advi­sors and Mil­len­ni­um Management.

The Starwood Capital Group headquarters in Miami Beach.

New York real-estate devel­op­ers have also flocked to the mag­ic city to accom­mo­date all the new­com­ers, scoop­ing up land in what some have called a frenzy. 

Steve Witkoff moved his oper­a­tions here, Miki Naf­tali bought prime space in down­town Mia­mi and Har­ry Mack­lowe is devel­op­ing apart­ment build­ings near a mass-tran­sit access point. Bil­lion­aire devel­op­er Stephen Ross recent­ly announced plans to rede­vel­op the his­toric Deauville Beach Resort in Mia­mi Beach and is join­ing with 

Swire Prop­er­ties Ltd.

on what they say will be the tallest office tow­er on Brick­ell Ave., Miami’s pre­mier busi­ness corridor.

And now sev­er­al large law firms includ­ing Win­ston & Strawn, King & Spald­ing and Sid­ley Austin have fol­lowed the mon­ey to Mia­mi as well. All are look­ing for office space, and inven­to­ry is tight.

On the tech side, the Mia­mi area is now home to 10 “uni­corns,” or star­tups val­ued at $1 bil­lion or more, includ­ing the addi­tion this year of Yuga Labs, which owns the Bored Ape Yacht Club and Cryp­toP­unks NFT col­lec­tions. It raised $450 mil­lion in seed fund­ing back in March before the cryp­to mar­ket turned. Ven­ture-cap­i­tal fund­ing in the city more than dou­bled in 2021, to more than $4.6 bil­lion, accord­ing to data firm CB Insights. In the first quar­ter of this year, Mia­mi-area VC deals topped $1 billion.

Drawn to the action, Andreessen Horowitz, a Bay Area-based ven­ture-cap­i­tal firm, is mov­ing its cryp­to office, a16z Cryp­to, to Mr. Sternlicht’s build­ing, accord­ing to peo­ple famil­iar with the matter.

Miami’s 44-year-old Repub­li­can may­or gets much cred­it for the city’s recent suc­cess in attract­ing new busi­ness­es. Mr. Suarez, a lawyer who served as a city com­mis­sion­er for eight years, moved to City Hall in 2017, pledg­ing “to make Mia­mi a city where every­one can have an oppor­tu­ni­ty to suc­ceed by hav­ing access to the jobs of tomorrow.”

Miami Mayor Francis X. Suarez, left, poses in front of the Miami Bull at the Miami Beach Convention Center, unveiled to kick off the Bitcoin 2022 conference.



Photo:

Wil­fre­do Lee/Associated Press

The U.S. Con­gress gave his efforts a boost that year when the new fed­er­al tax law capped state and local tax deduc­tions in places like New York, New Jer­sey and Cal­i­for­nia. With­out that deduc­tion, those states became even more expen­sive to live and do busi­ness in than Flori­da, which has no state income tax.

When Covid-19 erupt­ed in 2020, New York City was an ear­ly epi­cen­ter. Droves of Wall Street exec­u­tives decamped to South Flori­da, where restric­tions were less severe and the tem­per­ate cli­mate meant peo­ple could meet out­side year-round. Mia­mi also eased pan­dem­ic-relat­ed restric­tions far faster. While New York City shut­tered restau­rants for more than 10 months, Mia­mi reopened after two.

Mr. Suarez made nation­al head­lines in Decem­ber 2020, when some­one in the tech com­mu­ni­ty sug­gest­ed on Twit­ter that Sil­i­con Val­ley should relo­cate to Mia­mi. “How can I help?” the may­or respond­ed in a tweet that went viral and has come to epit­o­mize a city that pledged to do what it took to attract businesses.

Annual income tiers for the approximately 850,000 people who migrated to Florida and New York in 2019 and 2020

Mia­mi-Dade Coun­ty expe­ri­enced a greater influx of new busi­ness­es dur­ing the pan­dem­ic than ever before. A report from the U.S. Cen­sus Bureau cit­ed 106,810 new busi­ness appli­ca­tions in Mia­mi-Dade dur­ing 2020. That was up more than 24% from 2019, which was the record at the time. A new high of 135,710 busi­ness appli­ca­tions were made last year, the bureau said.

“New York used to be the finan­cial cen­ter of the world, it’s no longer in my opin­ion,” Mr. Suarez said dur­ing an inter­view at Mia­mi City Hall, the smell of Cuban cof­fee in the air. “You no longer have to be phys­i­cal­ly present in New York to do deals.”

While New York saw an exo­dus of res­i­dents who report­ed $21 bil­lion in total income on their 2019 fed­er­al returns, accord­ing to the IRS, Flori­da saw an influx of res­i­dents who report­ed $41 bil­lion in income, the most any state received.

A view of the Paramount Miami Worldcenter condo tower from one of the property’s pools.

Long­time Mia­mi busi­ness­men say they notice the difference.

“We’ve been work­ing at this for a very long time,” said Nitin Mot­wani, the lead devel­op­er of Mia­mi World Cen­ter, a multi­bil­lion-dol­lar project with 27 acres of retail, res­i­den­tial, office and hotel facilities.

It took Mr. Mot­wani and his part­ners five years to raise the first $1.5 bil­lion for the project, he said, and less than 12 months to raise the next billion.

While some Miami­ans are swim­ming in the spoils brought by new­com­ers, oth­ers are get­ting wiped out. Valerie Lopez moved with her fam­i­ly from Colom­bia to Mia­mi in the 1980s. In 2017, she co-found­ed Angle, a pho­tog­ra­phy mar­ket­place that con­nects peo­ple and busi­ness­es with pro­fes­sion­al photographers.

She did her company’s fundrais­ing in Cal­i­for­nia. When ven­ture cap­i­tal­ists asked why she was stay­ing in Mia­mi, her response was always: “Because it’s afford­able and I love it.”

That’s changed dra­mat­i­cal­ly over the past two years. She and her hus­band were pay­ing $3,700 for a three-bed­room apart­ment fac­ing the bay in Miami’s Edge­wa­ter neigh­bor­hood. In Decem­ber their land­lord want­ed to raise their rent to $5,000, and then some­one from New York offered $7,000. In March, the cou­ple moved to a small­er apart­ment in the Wyn­wood neighborhood.

James Curnin is a devel­op­er who moved to Mia­mi in 2019 and is now build­ing a mul­ti­fam­i­ly prop­er­ty in Bay Har­bor near Mia­mi Beach. He loves the weath­er, the beach, and says he’s nev­er leaving.

Miami resident Valerie Lopez moved to a smaller apartment after newcomers drove up rents.

Nonethe­less, he has noticed that busi­ness doesn’t pro­ceed as smooth­ly as it once did.

Right before the pan­dem­ic, when he moved to Mia­mi, he said it took no more than four months from when he sub­mit­ted devel­op­ment plans to when he got city approval. Now, with the num­ber of projects swamp­ing Mia­mi Beach’s staff and resources, that same process takes near­ly a year, Mr. Curnin said.

Mia­mi has most­ly been able to avoid hot-but­ton polit­i­cal issues when appeal­ing to busi­ness­es, but that is becom­ing more com­pli­cat­ed. Mr. Suarez has warned that a law cham­pi­oned by Flori­da Gov. Ron DeSan­tis ban­ning the dis­cus­sion of gen­der iden­ti­ty in ear­ly school grades could feed into cul­ture wars that hurt Miami’s abil­i­ty to attract new busi­ness­es and residents. 

The Supreme Court rul­ing that over­turned Roe v. Wade presents anoth­er poten­tial chal­lenge, busi­ness exec­u­tives say. The Flori­da gov­er­nor signed a law in April that banned abor­tions after 15 weeks. A cir­cuit court judge on June 30 struck it down, but the state filed an appeal.

Janine Yorio, chief exec­u­tive of the New York City start­up Everyrealm, said she and her more than 60 employ­ees last year dis­cussed relo­cat­ing to Mia­mi. The firm, which devel­ops real estate in the Meta­verse, an immer­sive three-dimen­sion­al net­work of vir­tu­al worlds, is a good fit for Miami’s ambi­tions. Her employ­ees also loved the weath­er and vis­it­ing the city.

She ulti­mate­ly decid­ed to keep the head­quar­ters in New York, where a core of employ­ees live near­by. Now, the abor­tion issue gives her anoth­er rea­son not to move there, she said.

A waiter hands out menus at the Miami satellite of the popular New York eatery Carbone.

“It’s clear­ly a set­back for women,” Ms. Yorio said, adding that the court rul­ing could become a recruit­ment dilem­ma for com­pa­nies based in Miami.

And while the may­or likes to boast that Mia­mi “went all in cryp­to,” it’s far from clear whether this will be a win­ning bet. Mr. Suarez announced late last year that he would accept his salary in bit­coin and he aggres­sive­ly pur­sued the spon­sors of the bit­coin con­fer­ence, per­suad­ing them to hold the mar­quee indus­try event in Mia­mi instead of Los Ange­les, where it was orig­i­nal­ly planned.

Still, bitcoin’s recent loss in val­ue has some wor­ried that the cryp­to asso­ci­a­tion is a risky one.

The Miami­Coin, the city-brand­ed cryp­tocur­ren­cy cre­at­ed by an orga­ni­za­tion called City­Coins, has lost 98% of its val­ue from its peak in Sep­tem­ber. While Mia­mi was able to cash out $5 mil­lion from it, investors were left hold­ing the bag.

Mr. Suarez said Miami­Coin may not suc­ceed, but his No. 1 goal con­tin­ues to be bring­ing what he calls a “con­flu­ence of cap­i­tal” into the city.

One way Mia­mi hopes to attract that cap­i­tal is by host­ing splashy events, many with an inter­na­tion­al appeal, build­ing on its Art Basel fran­chise. The city recent­ly approved a plan to build a soc­cer sta­di­um for the local Inter Mia­mi CF team and Mia­mi will be one of the 11 U.S. host cities for the 2026 World Cup. 

In May, Mia­mi Beach host­ed the first annu­al Aspen Ideas: Cli­mate con­fer­ence in Mia­mi Beach, attract­ing chief sus­tain­abil­i­ty offi­cers from com­pa­nies such as Google, 

Gen­er­al Motors Co.

and 

Black­Rock Inc.

“We’re a pret­ty good can­vas to talk about cli­mate change,” said Mia­mi Beach Mayor 

Dan Gelber.

Some areas of the City of Mia­mi Beach expe­ri­ence reg­u­lar flood­ing dur­ing heavy rain­fall and high tides. Instead of avoid­ing the top­ic, the city has embraced the cli­mate-change con­ver­sa­tion, and is work­ing on rais­ing its roads to help com­bat the problem.

ZZ’s is one of about a dozen new private clubs that have opened in Miami to cater to the new elite.

Lat­er that month Mia­mi host­ed a For­mu­la One Grand Prix, attract­ing a glob­al audi­ence. Numer­ous Wall Street financiers flew down for the race, and hotels report­ed an increase in 25% rev­enue per avail­able room for that week com­pared with prepan­dem­ic years.

South Florida’s food scene is also boom­ing, aid­ed in part by New York­ers who have made Mia­mi their new home. Jeff Zalaznick, a co-own­er of Major Food Group, fled to Mia­mi to ride out the pan­dem­ic. In the past two years he and his part­ners have opened up five restau­rants in the city, includ­ing a satel­lite of their pop­u­lar New York eatery Carbone.

“I came for a week and I nev­er left,” said Mr. Zalaznick, who had lived in New York his entire life.

He and his part­ners also opened a pri­vate club called ZZ’s that they’re now plan­ning to launch in New York. It’s one of about a dozen new pri­vate clubs that have opened in Mia­mi to cater to this new elite. The part­ners are also code­vel­op­ing a lux­u­ry con­do-hotel in Miami’s finan­cial cen­ter called “Major” that they say will be the tallest tow­er in the city.

The city’s culi­nary rep­u­ta­tion received a boost in June, when Mia­mi restau­rants were award­ed 11 Miche­lin stars for the first time, join­ing cities such as Chica­go, New York, San Fran­cis­co and Los Angeles.

Share your thoughts

Do you think Mia­mi can suc­ceed in piv­ot­ing its econ­o­my? Why or why not? Join the con­ver­sa­tion below.

“We are white hot,” said Rolan­do Aedo, chief oper­at­ing offi­cer of the Greater Mia­mi Con­ven­tion & Vis­i­tors Bureau, who helped ini­ti­ate the effort to get Miche­lin down to Florida.

Yet even the city’s expand­ed enter­tain­ment offer­ings are expe­ri­enc­ing their own grow­ing pains. At the For­mu­la One race, guests com­plained of the sear­ing heat at the sta­di­um, which pro­vid­ed lit­tle shade. Some of the stair lifts that were used to get dis­abled guests up and across the pedes­tri­an bridges locat­ed through­out the venue lost pow­er, requir­ing staff to car­ry those guests so they could reach their seats.

“Amaz­ing things are hap­pen­ing in the city,” said Ms. Lopez, the start­up founder. “It’s a new era, which is great. It brings a lot of ben­e­fits but also a lot of issues.”

Write to Deb­o­rah Acos­ta at deborah.acosta@wsj.com

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